From 1 January 2015 the Government is changing the way it assesses income for new account-based pensions. This has the potential to impact Centrelink payments for age-pensioners.
Age-Pension entitlements are impacted by 2 tests that Centrelink apply;
- Asset Test
- Income Test
Your levels of assets and income under these tests may reduce the amount of age-pension you receive.
These changes are going to impact the calculation of the Income Test only.
Under existing rules the calculation takes into account the “annual income” you drawdown from your pension account, factoring in your original balance and life expectancy.
Under the new rules the account-based pension will be deemed to earn a certain rate of income regardless of what your actual pension payments are. The deeming rate starts at 2% before moving up to 3.5% of the account balance.
Account-based pensions established prior to 1 January 2015 will continue to be assessed under the existing rules.
Invariably the new rules are going to tighten up entitlements. From the numbers we have been running for clients who are receiving a part age-pension – it appears more likely than not account-based pensions started post 1 January 2015 will result in a lower level of Centrelink entitlements.
We’d recommend speaking with a Certified Financial Planner prior to 1 January 2015 to find out how these changes will impact on you and what can be done prior to ensure you are maximising your Centrelink entitlements.